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Are all officers onboard with dissolving the corporation?

The C corporation you work for is in financial trouble, and you and all but one of the other executives feel the time has come to dissolve it. The dissenter, one of the founders of the business, is part of the problem; his mismanagement helped to create the financial turmoil.

You think it best to seek legal help, both to deal with the obdurate executive and to ensure that the dissolution of the corporation is handled properly.

Basic first steps

Your attorney can help you draft a resolution to dissolve the corporation. You will then need to meet with the executives and board of directors so they can review, approve and sign the document. However, before a formal dissolution can begin, a certain percentage of stockholders must approve the resolution and vote to accept it. You can find the required percentage in your bylaws.

Making payments

Take an inventory of the corporation’s assets and arrange to sell them. The next step is to prepare federal and state tax returns so you know how much money to set aside to pay the final obligations. Once you take care of the taxes, you can pay your secured creditors, followed by the unsecured creditors. Any remaining funds should pay preferred stockholders and then the holders of the corporation’s common stock.

A tip on taxes

If possible, dissolve the corporation before the end of the calendar year. That way, your final tax return will be for the full year, whereas, if dissolution slides into the next year, an you'll need an additional tax return for the number of months the corporation was still alive.

Moving on

There are many reasons for deciding to dissolve a corporation besides mismanagement or a conflict within the executive ranks. This kind of decision is never easy, especially when you face opposition, but once made, resolve to wind down the business in as efficient and expeditious a manner as possible.

We hope that the above provides an insight into this business compliance practice. Please feel free to contact our firm if you have any questions. This is an advertisement for legal services. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

 

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This is an advertisement for legal services.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

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